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The inversion of the US Treasury yield curve made headlines last month. In Sonal Desai's opinion, the yield curve means nothing about the future of the world's economies. There is a glaring contradiction in the fact that so many market participants and commentators emphasise the heightened level of economic uncertainty and, at the same time, seem to consider flat or inverted yield curves as fool-proof predictors of a recession. This is misguided – I don't think the yield curve tells anything about what lies ahead for the real economy. A look at the evidence Yes, protracted uncertainty on trade is having some impact on business sentiment. However, we have lived with trade uncertainty for almost three years now, with very little economic impact. The US economy is holding up well, and now it benefits from a more dovish US Federal Reserve (Fed). China has shown a bit of weakness, but not a sharp slowdown, and the latest data shows that China’s lower exports to the US have been offset by stronger exports to the rest of the world. The weakness in Europe is more pronounced, notably in Germany as we’ve seen with recent gross domestic product data, but by no means a collapse. The US economy continues to create jobs at a robust clip, even with the unemployment rate already at a 50-year low. According to the US Bureau of Economic Analysis, employee wages and salaries grew at 4.7% in 2017, 5% in 2018 and 5.1% in the first half of this year. Household consumption powers the economy, and the household saving rate as of June this year is at a very healthy 8.1%. In short: the economic data shows no evidence that either the US nor the global economy is approaching a recession. Feeding the fear Government bond markets are still distorted by the major role that central banks continue to play. The Fed has cut interest rates and signalled the possibility of further reductions; the European Central Bank has opened the door to a resumption of quantitative easing. Major central banks are essentially inviting investors to ignore the economic data and bet on lower yields. So, I think fixed income markets are betting on the Fed, and the Fed has just taken a dovish turn – ignoring the economic data. However, this betting on the Fed gives no indication whatsoever on where the economy is going. In other words, I think the Treasury yield curve has no value whatsoever as a predictor of recession. It’s just a good predictor of Fed dovishness, for now, and a sign of some panic in the markets. The markets and the Fed seem to be looking at each other, feeding each other’s fears, and completely ignoring what’s actually going on in the real economy. Sonal Desai, Ph.D. is the Chief Investment Officer at Franklin Templeton Fixed Income. This article is sole opinion of the author. This article was originally published in The FM Report.

Sep 08, 2019
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Gender pay gap reporting is coming to Ireland. Sonya Boyce explains how you can prepare for this essential step towards gender pay parity. The gender pay gap is the difference between what is earned on average by women and men based on average gross hourly earnings of all paid employees – not just men and women doing the same job or with the same experience of working patterns. The Gender Pay Information Bill 2018 will be enacted in Ireland imminently. It will require mandatory gender pay gap reporting for public and private sector companies. This Bill follows a European trend where other countries, including Germany, France and Spain, have introduced similar legislation requiring organisations to publish information about the pay awarded to colleagues based on their gender. Such legislative developments have arisen in response to the fact that women in the EU are paid, on average, over 16% less per hour than men. In Ireland, the average gender pay gap is 13.9%. The World Economic Forum’s Global Gender Gap Report 2017 states that, if enough measures are not taken to address the gender pay gap, it will take 100 years to close the gap in the 106 countries included in the study. The big picture Gender pay gap (GPG) reporting is not just about equal pay; it is an initiative to introduce gender pay gap reporting as part of a wider initiative to address female participation and employment gaps between genders. GPG reporting is seen as the first step in addressing parity in the employment market in terms of gender, particularly at the management level. It is hoped that the introduction of GPG reporting will provide organisations with an incentive to develop female-focused strategies and initiatives to build greater representation in their workforce, not only from a gender perspective but across the broader spectrum of diversity and inclusion. Encouraging a diverse and inclusive workplace is proven to strengthen the culture internally and develops an employer brand of choice to retain and attract the talent needed. It also enables organisations to deal with any inequities they have and show stakeholders a demonstrated commitment to diversity and inclusion. As Tim Cook, CEO of Apple, says, “Inclusion inspires innovation”. Diverse teams are smarter, more likely to generate new product ideas and enter new markets. Preparation In advance of the upcoming legislation, I advise all organisations to undertake a few key steps. First, you should review the employee data you hold about your workplace population. This data will include payroll and human resource information. Once data has been compiled, organisations can calculate your gender pay gap. After that, it is essential to building a narrative to explain and provide background information on the gender pay gap figure within your organisation. This narrative also serves to reassure employees, potential employees and other stakeholders as to why a gender pay gap figure exists. Lastly, organisations should develop and communicate an action plan on how it will work to reduce the gender pay gap figure. By outlining and delivering an effective action plan, it will ensure all stakeholders remain motivated and there is no reputational damage to an organisation. The bottom line McKinsey 2018 research suggests that companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability than companies in the fourth quartile. Diversity and inclusion have a positive impact on the bottom line and profits, and GPG reporting is a critical and tangible metric that management can rely on to ensure that women are paid fairly, being considered for promotion and being promoted and attaining senior-level management positions. The introduction of mandatory gender pay gap reporting is an essential step towards ensuring gender parity and fairness about pay and progression. Sonya Boyce is a Senior Manager in HR Consulting in Mazars.

Sep 08, 2019
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Good change management can make a business. It can keep it afloat when times are hard and make it soar when things are going well. It’s important you know how to assess your own organisation for its portfolio and programme maturity, says Féilim Harvey. For organisations, the difference between surviving and failing can be linked to how they adapt to change. Achieving meaningful change can mean constructing a portfolio of programmes and projects to move the business forward. Yet, many CEOs believe their businesses are not well prepared to execute change. Research shows that only 55% of change management programmes have established, or mature, planning processes in place. Programmes with immature processes can suffer losses 14 times larger than those with mature processes. Assessing your portfolio and programme management capabilities can help you to identify weak spots and start planning how to evolve. In turn, this will improve the rate of return of your change programmes and reduce wasted costs associated with poor execution. Assessment Let’s start with what a maturity assessment is not. It’s not a test of your project and programme managers’ capabilities. A maturity assessment aims to understand, assess and benchmark how your organisation undertakes project, programme and portfolio management.  Your entire organisation does not need to be mature in project portfolio management disciplines. You might exclude some areas, such as administration. Including the whole organisation in your assessment may very well ensure a low score. An evaluation should focus in on those areas responsible for the delivery of your change initiatives. Benefits of a maturity assessment There are many benefits to conducting a portfolio and programme maturity assessment. First, there is potential to reduce project cost losses from 28% to 2%. Transport for London achieved estimated savings of £1 billion through assessing and increasing its maturity level. Assessment will also help you understand your current capability to deliver change initiatives and inform decisions relating to risk exposure. You can compare different parts of the organisation to each other, or the business itself with peers or industry standards. This would help you assess where mature portfolio and programme management capabilities will have the most significant impact. Assessment can direct you to take action, redirect resources, look for external help or re-design your portfolio or programme for better results. What can I expect from a maturity assessment? The first step in an assessment is to agree on its scope. What are the priorities for review?   The second step is to interview key stakeholders and review portfolio/programme documentation to identify and assess critical risks.  A maturity assessment tool is generally used to help capture this information. The tool provides a clear RAG (red, amber, green) status for each of the elements and provides a summary of the review.   The third step is to score each area and provide supporting information. Risks and recommended actions are captured, and stakeholders should agree on how to put changes in place.   A full maturity assessment is typically completed within six to eight weeks, dependent on the scope of the assessment.  Scoring levels of maturity differ depending on the method used. They are generally expressed as ad-hoc, immature, established, mature or optimised, or similar. Very few organisations will ever need to obtain a Level 5 maturity level. What is important is to define what maturity level is suitable for your organisation to maximise your investment, identify quick wins and create a medium-term plan to get there. Féilim Harvey is a Partner in PwC.

Sep 08, 2019
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With a changing and uncertain business environment, Chief Financial Officers (CFOs) and finance functions must evolve to sit at the heart of decision making within their organisations, according to a series launched by IFAC (the International Federation of Accountants). The series includes: A vision for the CFO and finance function; Future-fit accounting roles for the next decade; and An evaluation tool to help guide organisations in finance function transformation. It is incumbent upon various stakeholders – organisations, professional accountancy organisations (PAOs), and individuals – to help prepare future-fit accountants in business. For organisations, developing a finance function vision will help identify the enablers of change and ensure that the finance function is fit-for-purpose to partner with the business. For PAOs, there are three priority areas to develop future-ready accountants in business: engaging accountants in business and their employers, advancing accountancy education, and promoting the value of the accounting profession. Source: IFAC

Sep 04, 2019
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The UK Government has announced that £16 million will go towards support for businesses and fund the training of thousands of customs experts for trading post-Brexit. This new government funding is now available to help businesses train staff in making customs declarations, and to help businesses who support others to trade goods to invest in IT. This funding will also help train more customs agents who will assist businesses trading with the EU. More than 3,000 agents have already been trained as part of an £8 million investment earlier this year, which has also been used to develop new online learning products for customs staff.  Businesses based in, or with a branch in, the UK can apply for funding ahead of the UK leaving the EU. Grants can be used to support: training costs for businesses who complete customs declarations, or who intend to in the future; and funding for IT improvement, which is available to small- and medium-sized employers who are currently involved in trade as an intermediary. To ensure maximum impact, the second wave of the grant scheme allows businesses to apply for the full cost of training, within certain limits as set out in the guidance. Businesses who would benefit from the funding should apply early and those who applied for the first wave may apply again as part of this new wave of grants for expenditure incurred on or after 31 July 2019. Applications will close on 31 January 2020, or earlier once all the funding is allocated. Source: HMRC

Sep 04, 2019
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The IASB has issued the latest issue of Investor Perspectives. In this edition, IASB board member Nick Anderson discusses the new disclosures in the targeted amendments to IFRS 17. Specifically, this issue features insight into the proposed amendments related to commission paid on short-term insurance contracts with expected renewals and profit recognition on long-term insurance contracts with investment returns. For more information, see Investor Perspectives article on the IASB’s website. Source: IASB

Sep 04, 2019